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Global Online Electronic International Interdisciplinary Research Journal (GOEIIRJ)

{ Bi-Monthly} Volume-I, Issue-II August 2012


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SUCCESSFUL ROLE PLAYED BY STATE BANK OF INDIA IN
PROMOTING FINANCIAL INCLUSION IN INDIA

DR. Sunil Ram Gaikwad,
Assistant Professor, Department of Economics
RNC Arts, JDB Commerce and NSC Science College,
Nasik Road - 422 101.

Abstract :
State Bank of India, largest and strongest nationalized bank in India ranks top among
first five banks workdwide.It received Skoch Financial Award 2012(A Krishna Kumar,
Managing Director and Group Executive - National Banking, State Bank of India)for its
project-Reaching the Last Mile: Banking The Unbanked by Honourable C Rangarajan,
Chairman, Prime Minister's Economic Advisory Council
State Bank of India has achieved 100 per cent coverage of its allotted unbanked
villages in Andhra Pradesh under the Financial Inclusion Programme (FIP) of the Reserve
Bank.

Key Words :

Introduction :
According to Chief General Manager Rakesh Sharma, out of 6,661 unbanked villages
with a population above 2,000 in Andhra Pradesh, SBI was allotted 1,369 villages to be
covered under the Financial Inclusion Programme by the RBI and the bank has achieved 100
per cent coverage.
"We have opened 35 brick-and-mortar branches, appointed 1,157 banking
correspondents, introduced 162 banks-on-bikes and 15 banks-on-Wheels, making use of
Information Technology in these villages," Sharma told a press conference today.
He said they were able to open as many as 2.1 lakh accounts in the targeted villages
with an average balance of Rs 400 to Rs 500 per account.
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{ Bi-Monthly} Volume-I, Issue-II August 2012


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The RBI has allowed the opening of zero balance-no frill accounts under the Financial
Inclusion Programme to encourage maximum coverage.
SBI now plans to cover villages with a population of less than 2,000 in an integrated
manner over the next two to three years, furthering the financial inclusion programme.
"We have a network of 41 urban banking correspondents in Hyderabad. We shall
expand the urban banking correspondent network to other cities in Andhra Pradesh to fulfill
the objectives of providing banking services to migrant population employed in urban as well
metro centres," he added.(articles.economictimes.indiatimes.com/2012-01-
02/news/30587645_1_unbanked-villages-state-bank-banking-services)

Theoretical Background :
STATE BANK OF INDIA (SBI), is the largest banking and financial services
company in India by revenue, assets and market capitalization. It is a state-owned
corporation with its headquarters in Mumbai, Maharashtra. As of March 2011, it had assets
of US$370 billion with over 13,577 outlets including 157 overseas branches and agents
globally. The bank traces its ancestry to British India, through the Imperial Bank of India, to
the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the
Indian Subcontinent. Bank of Madras merged into the other two presidency banksBank of
Calcutta and Bank of Bombayto form the Imperial Bank of India, which in turn became
the State Bank of India. The Government of India nationalized the Imperial Bank of India in
1955, with the Reserve Bank of India taking a 60 per cent stake, and renamed it the State
Bank of India. In 2008, the government took over the stake held by the Reserve Bank of
India. SBI is ranked No. 292 globally in Fortune Global 500 list in 2011.
SBI provides a range of banking products through its vast network of branches in India
and overseas, including products aimed at non-resident Indians (NRIs). The State Bank
Group, with over 18,324 branches, has the largest banking branch network in India. SBI has
14 local head offices situated at Chandigarh, Delhi, Lucknow, Patna, Kolkata, Guwahati
(North East Circle), Bhuwaneshwar, Hyderabad, Chennai, Trivandram, Banglore, Mumbai,
Bhopal and Ahmedabad and 57 Zonal Offices that are located at important cities throughout
the country. It also has 157 branches overseas.
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SBI is a regional banking behemoth and is one of the largest financial institutions in the
world. It has a market share among Indian commercial banks of about 20 per cent in deposits
and loans. The State Bank of India is the 29th most reputed company in the world according
to Forbes. Also, SBI is the only bank featured in the coveted "top 10 brands of India" list in
an annual survey conducted by Brand Finance and The Economic Times in 2010. The State
Bank of India is the largest of the Big Four banks of India, along with ICICI Bank, Punjab
National Bank and HDFC Bankits main competitors.


History :
The roots of the State Bank of India lie in the first decade of 19th century, when the
Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The
Bank of Bengal was one of three Presidency banks, the other two being the Bank of Bombay
(incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All
three Presidency banks were incorporated as joint stock companies and were the result of the
royal charters. These three banks received the exclusive right to issue paper currency in 1861
with the Paper Currency Act, a right they retained until the formation of the Reserve Bank of
India. The Presidency banks amalgamated on 27 January 1921, and the re-organized banking
entity took as its name Imperial Bank of India. The Imperial Bank of India remained a joint
stock company.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of
India, which is India's central bank, acquired a controlling interest in the Imperial Bank of
India. On 30 April 1955, the Imperial Bank of India became the State Bank of India. The
government of India recently acquired the Reserve Bank of India's stake in SBI so as to
remove any conflict of interest because the RBI is the country's banking regulatory authority.
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act,
enabling the State Bank of India to take over eight former state-associated banks as its
subsidiaries. On 13 September 2008, the State Bank of Saurashtra, one of its associate banks,
merged with the State Bank of India.
SBI has acquired local banks in rescues. For instance, in 1985, it acquired the Bank of
Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, the State
Bank of Travancore, already had an extensive network in Kerala.
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International presence :
As of 31 December 2009, the bank had 157 overseas offices spread over 32 countries. It
has branches of the parent in Colombo, Dhaka, Frankfurt, Hong Kong, Tehran,
Johannesburg, London, Los Angeles, Male in the Maldives, Muscat, Dubai, New York,
Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and
Singapore, and representative offices in Bhutan and Cape Town. It also has an ADB in
Boston, USA.
SBI operates several foreign subsidiaries or affiliates. In 1990, it established an
offshore bank: State Bank of India (Mauritius). In 1982, the bank established a subsidiary,
State Bank of India (California), which now has ten branches nine branches in the state of
California and one in Washington, D.C. The 10th branch was opened in Fremont, California
on 28 March 2011. The other eight branches in California are located in Los Angeles,
Artesia, San Jose, Canoga Park, Fresno, San Diego, Tustin and Bakersfield. The Canadian
subsidiary, State Bank of India (Canada) also dates to 1982. It has seven branches, four in the
Toronto area and three in British Columbia. In Nigeria, SBI operates as INMB Bank. This
bank began in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to
commence retail banking. It now has five branches in Nigeria. In Nepal, SBI owns 55 per
cent of Nepal SBI Bank, which has branches throughout the country. In Moscow, SBI owns
60 per cent of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia, it
owns 76 per cent of PT Bank Indo Monex.The State Bank of India already has a branch in
Shanghai and plans to open one in Tianjin. In Kenya, State Bank of India owns 76 per cent
of Giro Commercial Bank, which it acquired for US$8 million in October 2005..
The State Bank of India (with 74 per cent of the total capital) along with the largest
global banking groupBNP Paribas (with 26 per cent of the remaining capital)
headquartered in Parisformed a joint venture which established India's most reputed and
trusted life insurance company named SBI Life Insurance company Ltd. in March 2001.

Associate banks :
SBI has five associate banks; all use the same logo of a blue circle and all the associates
use the "State Bank of" name, followed by the regional headquarters' name:
State Bank of Bikaner and Jaipur
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State Bank of Hyderabad
State Bank of Mysore
State Bank of Patiala
State Bank of Travancore (http://en.wikipedia.org/wiki/State_Bank_of_India)

Research :
Successful role of SBI in promoting Financial Inclusion in India
SBI to set up 600 financial inclusion centres :
In a bid to give back-end support to business correspondents (BCs) operating in rural
areas and also exercise administrative control on them, State Bank of India has decided to set
up 600 financial inclusion centres across the country. The move to set up Financial Inclusion
Centers (FICs) is aimed at powering the bank's drive to reach basic and affordable banking
services to 12,421 out of the 72,315 unbanked villages (identified according to 2001 census)
having a population of over 2,000 by March-end 2012.According to the Government and the
Reserve Bank of India's directive, banks, especially from the public sector, between them
have to ensure that all identified villages have appropriate banking services by March-end
2012. These services have to be provided using the business correspondent (BC) and other
models with appropriate technology back-up. As the FICs have been envisaged by SBI, each
centre will provide the BCs back-end support services for opening no frills account',
processing applications for micro-credit (up to Rs 25,000) sourced by them, and cash
management. Further, the centre will also keep tabs on the progress made by the BC in
furthering the bank's financial inclusion plan. Each FIC will support and control 25 BCs.
India's biggest lender has marshalled the services of 14,000 odd BCs, including those
working with third-party technology service providers, for fulfilling its financial inclusion
mandate. By March-end 2011, SBI will have 300 FICs. Last month, the bank set up 22 FICs
in Andhra Pradesh and four in the National Capital Region. Overall, it will establish 600
FICs by March-end 2012.
Under the financial inclusion plan, SBI is currently providing basic banking services in
1,300 villages. This number will jump to 5,300 by March-end 2011 and will complete the
target of providing banking outreach in 12,421 villages by March-end 2012,

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SBI delivers financial inclusion across 1,369 villages in Andhra Pradesh :
The bank has opened 2.1 lakh accounts with an average balance of Rs 400 to Rs 500
per account Countrys largest public sector bank, State Bank of India (SBI) has achieved 100
per cent coverage across its share of unbanked villages in Andhra Pradesh as
prescribed under the Reserve Bank of India's (RBI) Financial Inclusion Programme
(FIP).
According to the bank's officials, out of the total 6,661 unbanked villages in Andhra
Pradesh, SBI was allotted 1,369 villages for to be covered under the FIP initiative and the
bank has managed to achieve complete coverage by opening 35 brick-and-mortar branches,
appointing 1,157 banking correspondents, and by introducing initiatives such as 162 banks-
on-bikes and 15 banks-on-wheels.
The bank has opened an estimated 2.1 lakh accounts in the targeted villages with an
average balance of Rs 400 to Rs 500 per account.
In a bid to encourage financial inclusion initiatives in the country, the RBI has allowed
opening of zero balance, no-frills accounts under the FIP. Although, under the initiative,
banks have only been asked to cover villages with a population of over 2000, SBI now plans
to cover villages with a population of less than 2,000 in an integrated manner over the next
two to three years.

SBI and Airtel join hands for bringing financial inclusion :
State Bank of India, the countrys largest commercial bank, and Bharti Airtel have
entered into a Joint Venture (JV) agreement. The newly formed entity will offer banking
products and services to people in unbanked and other areas. Speaking on the occasion, O. P.
Bhatt, Chairman, State Bank of India said, State Bank of India has always been in the
forefront of Financial Inclusion initiatives. More than 67 per cent of its 13,000 branch
network is in rural and semi urban areas. In the last four years, the bank has set up more than
15,000 customer service points of business correspondents as well as 13,000 business
facilitators, to increase its outreach. The bank has already reached out to more than 1 lakh
unbanked villages.
This joint venture will enable the bank to fulfill its mandate of reaching out to every
Indian, leveraging the distribution network of Airtel to provide banking services in a cost
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effective and secure manner. With this, we look forward to taking the benefits of banking to
the Indian masses and building a more inclusive society thereby carrying forward State
Banks vision of being the banker to every Indian, he added.
Commenting on the partnership, Sunil Bharti Mittal, Chairman and Managing Director,
Bharti Airtel said, This historic collaboration between SBI and Airtel brings together
two sectors that have made the most impact in addressing inclusive growth. The services
offered by the JV will enable financial inclusion and economic empowerment for people
across India. This will be a complete game changer, leveraging SBIs expertise in the
banking sector along with Airtels 150 million customer base and ecosystem of over 1.5
million retailers and distributors across India. Together, we will create a scalable operation
that will address the banking requirements of millions of Indians through the mobile
platform.
The Joint Ventures as Business Correspondent will engage Airtels retailers as
Customer Service Points (CSP) all over India in a phased manner. With this, Airtel mobile
customers will be able to visit these outlets and open new SBI bank accounts. Additionally,
existing SBI customers will also get serviced at these outlets.

SBI and Postal Department :
State Bank of India (SBI), the biggest lender, and the postal department of the country
are coming together to organize a basic banking services platform on the doorstep of the
millions of people in rural areas, who are still deprived of the banking facilities. SBI will use
Indian post's wide network in its financial inclusion initiative.
After this tie-up, the postmen will act as banking correspondents for SBI in over 12,000
villages. They are supposed to collect deposits and offer small credit and remittance facility
to the people living in far-flung areas. SBI currently has around 5,000 branches in the rural or
semi-urban areas, and it hopes to cover 12,492 villages by 2012 under its financial inclusion
outreach. SBI is hopeful that India Post tie up will strengthen its financial inclusion initiative.
Under its business correspondent model, Reserve Bank of India (RBI), has allowed
specific individuals and entities such as general store shop-owners, NGOs and post offices to
conduct banking business as agents of banks at places other than the bank premises.With a
network of 1.5 lakh branches, India Post has a wide reach across the country, for what it can
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Global Online Electronic International Interdisciplinary Research Journal (GOEIIRJ)
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play a momentous role in making banking accessible to a huge un-banked area of the
country.

Findings :
SBI has turned into the third-largest employer in India among listed companies after
Coal India Limited (383,347) and Tata Consultancy Services (226,751).
More than 67 per cent of its 13,000 branch network is in rural and semi urban areas. In
the last four years, the bank has set up more than 15,000 customer service points(CSPs) of
business correspondents(BCs) as well as 13,000 business facilitators(BFs), to increase its
outreach. The bank has already reached out to more than 1 lakh unbanked villages.

Conclusion :
The symbol of the State Bank of India is a circle and a small man at the center of the
circle (and not a key hole). A circle depicts perfection and the common man being the centre
of the bank's business.

References :
1) Wikipedia, free encyclopedia
2) http://en.wikipedia.org/wiki/State_Bank_of_India
3) articles.economictimes.indiatimes.com/2012-01-02/news/30587645_1_unbanked-
villages-state-bank-banking-services